MGT Midterm 3

What is money?

• Anything that is processed by a bank

• Anything that is generally accepted for payments

• Anything issued by the government for payment of public debts

• Anything that is backed by gold/silver

What would we expect to happen to M1 and M2 if depositors move their funds from time to checkable deposits?

• M1 and M2 would go down

• M1 would go down and M2 would stay the same

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  M1 and M2 would stay the same

• M1 would go up and M2 would stay the same

The Quantity Theory of Money would argue that which of the following is generally responsible for decreases in prices (i.e., deflation)?

• Money going down

• Money going up

• Output going down

• Velocity going up

Banks help solve the maturity mediation problem. What describes this problem?

• Individuals provide small amounts of deposits, but loans often need to be very large

• Individuals do not have enough information to make good investments on their own

• Individuals need a financial broker in order to purchase stocks and bonds

• Individuals need short-term access to deposits, but loans often need to be long-term

Which of the following would decrease the deposit multiplier?

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  People holding less money out of banks

• People holding more money out of banks

• Banks holding less money as reserves

• The government decreasing the reserve requirement

One of the beneficial reasons discussed for adopting the Spanish-style currency system rather than the British system by Jefferson was what?

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  Allowed for physically smaller coins

• Allowed for decimal arithmetic rather than different conversion factors

• Did not require a set exchange rate between gold/silver at the Treasury

• Allowed money to be backed by two different types of metal not just silver

How did the Coinage Acts of 1792 and 1834 differ from each other?

• The earlier act prevented paper currency from being issued by anyone while the latter act allowed it to be printed by the government

• The latter act increased the value of silver relative to gold to be paid by the U.S. Treasury

• The latter act decreased the value of silver relative to gold to be paid by the U.S. Treasury.

• The earlier act prevented paper currency from being issued by banks while the latter act allowed it

Gresham’s Law states ______?

• Government currency always circulates

• Competing types of money makes the system more efficient

• Good money drives out bad money

• Bad money drives out good money

What are bank notes actually? 

• IOUs of individual banks

• State issues of currency

• Government currency with famous bank presidents on their front

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  Counterfeit currency

Bank Note Reporters and Counterfeit Detectors increased bank note efficiency and helped them circulate around the country by _______?

• Purchasing stock of other banks in order to control their actions

• Establishing relationships among banks and forcing them to redeem each other’s notes at par

• Listing discounts of bank notes from face value based on the probability of default and cost of redemption

• Issuing large amounts of safe bank notes to push out bad bank notes